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However, the same regulation also tells us not to count certain
activities in deciding whether petitioners have spent enough time
on their activity for their participation to be material. The
most important of these exclusions is time spent on investment
activities, which does not count unless the taxpayer is directly
involved in the day-to-day management or operations of the
activity. Sec. 1.469-5T(f)(2)(ii)(A) and (B), Temporary Income
Tax Regs., supra at 5727; see also Mordkin. According to the
regulations, investment activity includes:
1. Studying and reviewing financial statements or
reports on operations of the activity;
2. Preparing or compiling summaries or analyses of
the finances or operations of the activity for the
individual’s own use; and
3. Monitoring the finances or operations of the
activity in a non-managerial capacity.
Sec. 1.469-5T(f)(2)(ii)(B)(1) through (3), Temporary Income
Tax Regs., supra.
While Mrs. Lapid testified that she spent many hours every
night studying and tracking her investments, the evidence she
submitted shows that she was actually just reviewing financial
statements and reports on operations. Because the regulation
specifically defines such monitoring as investment activity, we
cannot include that time in calculating whether she met the
material participation standard in three of the safe harbors she
is aiming for. This is true despite our belief that Mrs. Lapid
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